Exec of the Month Q&A: QBE's Jeffrey Grange

National Underwriter recently interviewed Jeffrey Grange, head of Management, Liability & Professional Lines for QBE, to get his views on the state of the market for professional liability coverages, the impact of increasing regulatory burdens and the evolving risks facing companies and the insurers that cover them.

Q: You've served in various capacities in management liability and professional lines underwriting areas for more than 25 years. How has this line evolved in that time in terms of exposures, and what are some of the greatest exposures that executives need to be insured against these days?

Jeffrey Grange: The pace of change has been remarkable; 60% of the economy is represented by the service sector. Further still, so much of the “new” economy is information based and revolves around data, the derivation and dissemination of content. “Services” and “service” providers are not only proliferating at an exponential pace but their business models are entirely transformed because their services are increasingly delivered by technology. The convergence of the traditional errors & exposures of service providers and their technological enablement–including content dissemination, media liability, technology errors & omissions, privacy violations, network security breaches and intellectual property rights disputes coupled with the rapid and long term secular growth trends in these sectors of the economy amplifies existing risks and creates new exposures. The risks and exposures facing customers are changing. This creates challenge for underwriters to identify and effectively underwrite and price these exposures. This complex and morphing environment is the jumping off point for product innovation as leading underwriters stay current and relevant as solution providers in the customers in the risk mitigation and risk transfer strategies.

The regulatory burden and the costs of compliance for directors and officers of private & public companies continue to grow unchecked. The litany of high profile bankruptcies and corporate failures synonymous with Enron accelerated the pace of re-regulation and new regulation and spurred wholesale changes in accounting rules and securities disclosures. Investment Banking IPOs laddering claims, research analysis conflict of interest claims, market-timing and late trading claims, market-conduct and sales practices claims, the aftermath of the global financial crisis and LIBOR are all examples that have generated increased personal liabilities for directors & officers and much more stringent best practice standards for corporate governance in the global economy. In the course of the past twenty five years we have witnessed the globalization of directors & officers legal liabilities. A decade ago examples of directors & officers claims or employment related actions outside of the United States were the rare exception. Today, the plaintiffs' bar, the explosion of (re)regulation and the personal liabilities of directors & officers has gone viral and global. There are no safe harbors and underwriters need to go where their insured persons and their insured organizations go by providing truly multinational policy solutions. These include globally compliant “master” programs and local admitted policies that address the inter-connectivity of the global economy and the risk management needs of multinational customers.

How would you characterize the current rate environment for D&O coverage? What are some of the contributing factors to where rates are now, and do you see that changing at all in 2014?

The D&O market place is not monolithic, and the rate environment looking forward to 2014 varies from segment to segment within the market. For example, the private-company management liability segment has experienced rate increases throughout 2012 and 2013 driven by the increased numbers of private company bankruptcies post global financial crisis. The depth and length of the recession also saw a major spike in employment practices claims due to business failures, reductions in force together with expanded liabilities for employers (e.g. Wage & Hour claims arising from FLSA).

In the financial institution segment, the large scale operational failures in the global financial crisis as systemic events such as the LIBOR scandal have led to a dislocated market, with reduced capacity and a steady diet of rate increases.

By contrast, the commercial public company segment, especially in the excess attachments and “Side A” classes has enjoyed a relatively benign loss experience, is oversubscribed with capacity and continues to see a highly competitive price environment.

Your bachelor's degrees are in human physiology and political science (from McGill University in Montreal). What drew you to a career in insurance, and what motivates you now?

I was very fortunate to graduate and join the Chubb Corporation one of the great franchises in our industry. Chubb is recognized for its commitment to learning & development and a superb track record of underwriting excellence. I loved the vocation of underwriting from the start. Over the course of my career I was privileged to apprentice with some great teachers, mentors and leaders across the industry that “paid it forward” with me. My passion for the craft of underwriting motivates me every day. QBE enjoys an unrivaled position of market leadership in the management liability and professional lines in Australia, throughout Asia, in Lloyds and across Europe. At QBE North America we will build these businesses in the deepest pool of opportunity in the global market to reinforce our global leadership in these lines of business. As we build the U.S. franchise I look forward to developing the next generation of underwriting leaders and “paying it back.”

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Shawn Moynihan is Editor-in-Chief of National Underwriter Property & Casualty. A St. John’s University alum, Moynihan has earned 11 Jesse H. Neal Awards, the Pulitzers of the business press; seven Azbee Awards, from the American Society of Business Press Editors; two Folio Awards; and a SABEW award, from the Society of American Business Editors & Writers. Prior to joining ALM, he served as Managing Editor/Online Editor of journalism institution Editor & Publisher, the trade bible of the newspaper industry. Moynihan also has held editorial positions with AOL, Metro New York, and Newhouse Newspapers. He can be reached at [email protected].